Insurers brace for multi-billion-dollar payout from record wildfires in September

Total economic costs from the recent wildfires across California, Oregon and Washington are likely to reach well into the billions of dollars, resulting in a multi-billion-dollar payout for insurers, according to a new report by re/insurance broker Aon.

Significant wildfires continued to burn across parts of the US throughout September, killing at least 43 people. In California alone, five of the state's six largest fire events since 1932 were recorded in August and September, along with five of the state's top 20 most destructive fires on record.

Aon's report reveals that the third quarter of 2020 was "historically the costliest of the year" given the peak of tropical cyclone season in the Atlantic and Pacific Ocean Basins.

Steve Bowen, director and meteorologist on the Impact Forecasting team at Aon, said "the wildfires, which were amplified by hot and dry weather in combination with abundant available fuel, ensured a record sixth consecutive multi-billion-dollar payout year for global insurers with this peril.

"This comes as the industry continues to put more focus on the increased annual costs arising from secondary perils."

According to the report, the US has reported 22 fires with at least 100,000 acres (40,468 hectares) burned in 2020 to date - a record since the statistic was first tracked in 1997. While the actual estimates are yet to be determined, the total economic costs from these fires are likely to reach well into the billions of dollars.

Meanwhile, the total economic losses from Hurricane Sally, which came ashore near Gulf Shores, Alabama, on September 16 as a Category 2 storm, are estimated beyond $5 billion, with public and private insurance losses exceeding $2.5 billion.

Tropical Storm Beta, which made landfall along the southern end of the Matagorda Peninsula near Port O'Connor, Texas, on September 21, bringing heavy rainfall and flash flooding to coastal Texas and Louisiana, has caused total economic losses of more than $100 million.

"While September did result in notable storm landfalls in the United States, Belize, South Korea, and Portugal, the re-emergence of the wildfire peril captured a significant number of headlines," said Bowen. "Historic fires from the perspective of structures lost and acres burned left a lasting impact in the Western United States."